Mt Gox Silk Road Fiasco Extraordinaire

When you read the all news about Mt Gox today, scenes from The Blacklist and Breaking bad come to mind. As Redington might say the plot is "truly unfathomable and what happens next is anyone's guess". I have been watching the bankruptcy of Mt Gox closely. They have a good amount of my money so I have read every court order carefully and have a good understanding of the development of the company. The story sounds more like fiction than fact.

Mark Karples, a sweaty manga cartoon loving geek living with his parents in Japan buys Mt Gox off a friend and turns what was once a magic card web site it into a the worlds biggest Bitcoin exchange. Within a few years the company is making millions in profits and overseas close to a billion dollars in capitol. Mark has 20 employees and hammocks in the office and they even starts a Bitcoin cafe on the ground floor of the head office in Tokyo. Its a place of crazy money, computer games and Linux  The companies activities spread all over the world.

Another Bitcoin organisation was growing during the same period, but on the dark web and this is called the Silkroad. On this website anyone can buy anything especially if its illicit and the main currency used is Bitcoin. Inevitably the drug lords who made fortunes on SR platform have to use Mt Gox in order to exchange their funds for fiat money. The two organisations grow in parallel,  however Mark Karples claims that Mt Gox was never liked by the Silk Road Community.

Trading bots on Mt Gox earned the company extra cash and the price of Bitcoin went through the roof from less than 10 US cents when Mt Gox first started to over $1000 USD. Mark offered to help the US government with fraud investigations. they would provide suspected fake passport applicants and details of suspicious activities to the FBI. This is ongoing Mark builds up a relationship with two Agents Carl Ford and Shaun Bridges. At the time he becomes a suspect and primary lead in the governments hunt for Silk road

Mt Gox's liquidity comes under question by the online community. In order to prove the assets of the company Mark makes a transfer 424,242 Bitcoins between accounts in one public transaction. It is a tribute to Monty Pythons Hitchhikers Guide to the Galaxy and proves that Mt Gox has at least $500 million in liquid assets at the time.
 
Silk Road is busted by joint FBI DEA operation. Though Bitcoin was used by Silkroad patrons for its perceived anonymity it turns out that through the course of the trail officials manage collect allot of funds from various people involved due to the traceable public ledger. The judge praises the bitcoin block chain for allowing this. The head villain "Dread Pirate Roberts" or Ross Ulbricht is detained and put on trial with many of his accomplices and Silk Road users. It is the biggest international drug bust ever and the US government collects all the funds.

At the the time of the Silk Road bust, Mt Gox is also put under FBI investigation by Shaun Bridges  

They have to freeze large parts of their business and all their bank accounts. In addition Mt Gox begins to experience a "bank run" and has liquidity issues and collapses. Its Bitcoin price dropped through the floor before the collapse. It's a disaster of unmatched proportions for the digital currency world.

Mt Gox's bankruptcy proceeding drags on. Mark Karples claiming hundreds of millions in looses due to theft through hackers using the Bitcoin malleability weakness. Bankruptcy claims by the public are still (to this day) not being accepted until the results of a proper investigations are complete. 200,000 bitcoins are found on a forgotten hard drive. In total there hundreds of millions in dollars and Bitcoin's sitting in the Mt Gox accounts and finding the reported theft as this money could potentially repay many of Mt Gox's dept. It's all become pretty hefty for a company named after some fantasy card thing. Mark Karples is publically shamed and has been removed from bankrupts process by the lawyer. He is very silent on the matters and hides from the public eye.

In January 2015 Newspapers announce that they believe that missing Bitcoins from Mt Gox where stolen by someone rather than hacked as Mark had claimed

"Tokyo's Metropolitan Police Department (MPD) told The Yomiuri Shimbun newspaper on Thursday that no more than around 7,000 of the roughly 650,000 Bitcoins that vanished from Mt Gox could be attributed to cyber-attacks. " 

This news found at here went little noticed until the recent revelations of two government officials.

The latest DEA and FBI confessions shine a whole new light on this bazaar plot.

This news has come up through the Silk Road trail and the unsealing of this official document. The entire trial in contention. Two primary officials involved in investigations of Silk Road are accused of theft and extortion of millions of dollars from Silk Road, Mt Gox and other Bitcoin exchanges. It is an under cover investigation saga that quickly became twisted and out of control. 

DEA agent Carl Force and Secret Service Special Agent Shaun Bridges infiltrated into the illusive Silkroad through an inside informant Curtis Green, a 47 year old normal guy who didn't do drugs and worked for SR as a customer service rep. Carl Force first met Curtis when they busted him with a Kilo of cocaine in his letterbox. quite out of character but, he cooperated and opened up his logins for FBI use. Curtis's pseudonym was "flush" and worked with Carl who became "Nob" amongst others. At first they worked for DPR (Ross Ulbricht) doing admin for the Silk Road web site. All this information is logged by the investigation.

After some ongoing dramas and thefts, Ross Ulbrich noticed someone had stolen $350k from Silkroad petty cash using the "Slush" login. Dread Pirate Roberts got angry and after some online discussion ordered a hit to "terminate" Curtis. This was to be carried out by "Nob" (Carl Force) who has also become a hit man on the Silk road site. So Carl and Shaun faked the murder of Curtis, made proof of death photos, collected payment for themselves, let Curtis free and continued to infiltrate Silk Road.

Shaun and Carl continued on a takeover. Mt Gox provided information and were extorted for services, Carl Force became a Bitcoin Compliance Consultant on the side and acquired shares in rival exchanges whilst manipulating the market through regulatory powers. With so much Bitcoin on their hands, the two agents had to coax various Bitcoin and payments companies to help convert their ill-gotten gains into dollars. Mark Karples refused to do a laundering deal with Carl Force and that week gets a subpena for his US operation from Shaun Bridges. Carl Forced even tipped off Dread Pirate Roberts on the FBI Silk Road investigation. Shaun and Carl's corruption continues until eventually Silk Road gets busted. Shortly after they leave government service at the DEA and FBI.

So Ulbrich goes to trial in 2014 and accuses Mark Karples of being the real mastermind of Silk road.  It becomes evident that the former agents Carl and Shaun had been corrupt and they are put under investigated by the government for serious fraud and misconduct. A huge amount of evidence is withheld from the trial because it would hinder ongoing investigations of the government. The Department of Justice are now charging Shaun Bridges and Carl Force with fraud and it is expected that number will be in the millions.

So there it is in a nut shell (also see the Forbes article). You can't help to wonder if there is an illusive Redington or Berlin out there with hundreds of millions of dollars worth of Mt Gox funds. The results from the  new trial will be very telling. Could Mark Karples be Heisenberg? are the 650,000 Bitcoins the Japanese police looking for possibly with the FBI? Ether way someone should make a manga cartoon on it, it is insane!

Mark Karple in his early Nija formations, just before he said "no way" to an FBI summons